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A lorry crossing the border between Ireland and Northern Ireland
The Republic of Ireland will have to build border inspection posts in the event of a no-deal Brexit, the report warns. Photograph: Paul Faith/AFP/Getty Images
The Republic of Ireland will have to build border inspection posts in the event of a no-deal Brexit, the report warns. Photograph: Paul Faith/AFP/Getty Images

Northern Ireland businesses warned over no-deal Brexit

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Firms face severe problems from export checks and inspections, report says

A no-deal Brexit will create severe problems for Northern Irish businesses and oblige the Republic of Ireland to build border inspection posts, a report has said.

Firms will have “limited room for manoeuvre” as they face an array of export checks, inspections and declarations, according to the report, which was commissioned by Northern Ireland’s Department for the Economy and published this week.

It was a sobering reflection on the challenges if the UK leaves the EU without a deal, according to its authors, Eric Pickett and Michael Lux, lawyers who specialise in EU and international customs law.

“In particular, it confirms the Northern Ireland civil service’s concern about the impact of EU tariffs on food exports to Ireland, and the ability of micro and small enterprises with no experience in customs procedures and operations to continue to export to Ireland,” said a cover note. More than 80% of small Northern Irish exporters trade only with the republic.

The study said Ireland would need to establish inspection posts close to Northern Ireland to monitor trade in animal and food products, raising the spectre of a hard border that has prompted alarm from politicians and police chiefs who worry about attacks by dissident republicans.

The report said use of technology such as electronic monitoring could be expanded but would not obviate the need for physical inspections. It also said the UK and EU could seek an exemption from World Trade Organization rules requiring tariffs and checks, but that it would probably be temporary.

The EU has strict rules for checking animals and food products at border inspection posts (BIPS) near the point of entry. Ireland’s existing posts at Dublin airport, Dublin port and Shannon airport are more than 60 miles from the border. “Consequently, Ireland will have to establish BIPS which are closer to the border,” said the report.

The findings were a blunt reminder that there is no easy fix to the Irish border conundrum that has bedevilled the UK’s attempt to leave the EU and presented a dilemma for the Conservative party leadership candidates vying to replace Theresa May.

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What does a no-deal or WTO-rules Brexit mean?

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If the UK leaves the EU without a deal it would by default, become a “third country”, with no overarching post-Brexit plan in place and no transition period. The UK would no longer be paying into the EU budget, nor would it hand over the £39bn divorce payment.

The UK would drop out of countless arrangements, pacts and treaties, covering everything from tariffs to the movement of people, foodstuffs, other goods and data, to numerous specific deals on things such as aviation, and policing and security. Without an overall withdrawal agreement each element would need to be agreed. In the immediate aftermath, without a deal the UK would trade with the EU on the default terms of the World Trade Organization (WTO), including tariffs on agricultural goods. This has also been referred to by government ministers as an "Australia-style deal". Australia does not have a free trade agreement with the EU.

The UK government has already indicated that it will set low or no tariffs on goods coming into the country. This would lower the price of imports – making it harder for British manufacturers to compete with foreign goods. If the UK sets the tariffs to zero on goods coming in from the EU, under WTO “most favoured nation” rules it must also offer the same zero tariffs to other countries.

WTO rules only cover goods – they do not apply to financial services, a significant part of the UK’s economy. Trading under WTO rules will also require border checks, which could cause delays at ports, and a severe challenge to the peace process in Ireland without alternative arrangements in place to avoid a hard border.

Some no-deal supporters have claimed that the UK can use article XXIV of the General Agreement on Tariffs and Trade (Gatt) to force the EU to accept a period of up to 10 years where there are no tariffs while a free trade agreement is negotiated. However, the UK cannot invoke article XXIV unilaterally – the EU would have to agree to it. In previous cases where the article has been used, the two sides had a deal in place, and it has never been used to replicate something of the scale and complexity of the EU and the UK’s trading relationship.

The director general of the WTO, Roberto Azevêdo, has told Prospect magazine that “in simple factual terms in this scenario, you could expect to see the application of tariffs between the UK and EU where currently there are none”.

Until some agreements are in place, a no-deal scenario will place extra overheads on UK businesses – eg the current government advice is that all drivers, including lorries and commercial vehicles, will require extra documentation to be able to drive in Europe if there is no deal. Those arguing for a “managed” no deal envisage that a range of smaller, sector-by-sector, bilateral agreements could be quickly put into place as mutual self-interest between the UK and EU to avoid introducing or to rapidly remove this kind of bureaucracy.

Martin Belam

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The report noted that Switzerland and European Economic Area countries have derogation from inspection rules but that is because they have a deal with the EU. “The problem is that under a no-deal scenario, this option is not available.”

Boris Johnson, Andrea Leadsom, Dominic Raab and Esther McVey have vowed that if they win the Tory leadership they will take the UK out of the EU on 31 October regardless of whether or not a deal is in place.

This week’s report follows a series of other warnings about the impact of a no-deal Brexit on Northern Ireland. David Sterling, the head of its civil service, wrote to local political parties in March saying it could undermine security and worsen unemployment.

The taoiseach, Leo Varadkar, said on Tuesday that it would be a “terrible political miscalculation” for anyone in London to think that a new prime minister would prompt the EU to renegotiate the withdrawal agreement. “That is really to misunderstand how the EU works.” May, he added, was not a bad negotiator and had obtained the best deal possible for the UK.

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